Should You Stick With Stocks?

Experts tell retirement savers to sit tight, avoid quick sell-offs

In his book The 20 Retirement Decision You Need To Make Right Now, LeVitre tells retiring investors to imagine three buckets.

The bucket list

Bucket 1 holds the money you plan on spending in the next three years. It's in cash investments such as bank accounts and CDs that protect your principal.

Bucket 2 contains money you'll need in years four through nine of your retirement. It is made up of corporate or government bonds designed to mature each year. As the bonds mature, the money is shifted to Bucket 1 to use for current living expenses.

Bucket 3 holds money you don't plan on spending for at least 10 years. It's invested in individual stocks or mutual funds. Occasionally, you will need to sell some of your stock to replenish your bond portfolio, but if the stock market is having a bad year, you can afford to wait, because you have seven years of guaranteed income from your cash and bond holdings.

"In that lengthy time span, your stock portfolio has plenty of opportunity to regain any losses from a down year or two," LeVitre writes.

"My clients think they're paying me for investment advice," LeVitre said in a phone interview. "But what they're really after is peace of mind."

Worrying about how to invest retirement savings can indeed be stressful, but if you have that problem, consider yourself lucky. According to EBRI, 29 percent of those responding to its Retirement Confidence Survey had less than $1,000 in retirement savings and investments outside of pensions or home equity, and 56 percent had less than $25,000.